Are any of your employees eligible for the Kentucky K-4 Form Withholding Exemption? The Kentucky K-4 form allows employees to file an exemption from Kentucky state taxes or request that additional Kentucky state taxes be withheld from their paychecks. In this K-4 form guide, we’ll take a look at the Kentucky withholding exemption form, who should fill it out and how to fill it out.
Understanding Kentucky Income Tax
It’s important to understand that all employees are subject to state tax, unless they meet the Kentucky K-4 Form Withholding Exemption criteria. Individuals who earn money in Kentucky are taxed at 4.5 percent, and they receive a standard deduction of $2,980 as of 2023. The tax rate and standard deduction are periodically revised. In 2022, individuals were taxed at 5 percent and given a standard deduction of 2,770.
Individuals Who Can Receive Exemptions from Kentucky State Taxes
Certain individuals are not required to pay Kentucky taxes. This includes:
- Individuals who are not expected to have any income tax liability for the current year.
- Individuals who qualify for the Fort Campbell Exemption Certificate.
- Individuals who have a nonresident military spouse exemption.
- Individuals who are employed in Kentucky but live in a reciprocal state.
If the individual meets any of these requirements, they are exempt from Kentucky state taxes if they file the Kentucky K-4 form and keep a copy for their records.
Individuals Who Want Additional Kentucky State Taxes Withheld
Along with the reasons for state tax exemptions, there is a line for individuals who want to have additional money withheld from their Kentucky paychecks. This is particularly useful if the individual holds more than one job, performs gig work or owes taxes in other states.
Individuals Who Are Exempt from Kentucky State Income Taxes
Individuals can be exempt from Kentucky state income taxes if they received a refund for the entirety of their 2022 Kentucky state income taxes, and they expect to have all of the state income taxes they paid in 2023 to be refunded. This typically occurs when individuals or couples and people with children meet the income tax liability thresholds.
For 2022, those thresholds were:
- $13,590 for single people or married people living apart.
- $23,030 for families of three.
- $27,750 for families of four.
Military Exemptions from Kentucky State Taxes
Individuals who meet the requirements of the Servicemember Civil Relief Act and the amendments made by the Military Spouses Residence Relief Act are exempt from Kentucky state taxes. In order to be exempt from Kentucky state taxes under these provisions, all of the answers to the questions in the related section must be ‘yes’.
- The individual filling out the form must have a spouse who is in the military
- The spouse of the service member cannot be in the military.
- The servicemember spouse must have orders that assign them to a location in KY.
- The servicemember and the spouse must live at the same address.
- The spouse of the servicemember is in Kentucky to be with their spouse.
Understanding Reciprocal States
Kentucky has an agreement with several states, including Illinois, Indiana, Michigan and Wisconsin as well as Virginia and Ohio with certain restrictions. The agreement between Kentucky and the listed states allows employees to live in those states and work in Kentucky without paying Kentucky state income tax.
Understanding When K-4 Exemption Eligibility Ends
It’s important to have the employee fill out the K-4 form completely and honestly in order to be eligible for the state tax exemption. Individuals who are no longer eligible must let their employers know. In general, eligibility typically ends when:
- The spouse that is in the military leaves the military.
- The spouse who is not in the military enters the military.
- The day that the spouse and military service member no longer reside at the same address.
- The individual with the exemption is no longer eligible for complete refunds of their Kentucky state taxes.
How to Fill out Form K-4
The Kentucky K-4 form is two pages and includes instructions between the sections that must be filled out by the employee. It’s important for the employee to read the form completely to ensure they did not forget to answer a question.
The very top part asks for the employee’s name and mailing address. Next, the employee must check the appropriate boxes in order to indicate why they are exempt. If the individual is exempt due to the Servicemember Civil Relief Act and the amendments made by the Military Spouses Residence Relief Act, they should be able to mark ‘yes’ in every box under Section 3. Section 4 pertains to individuals who reside in a reciprocal state. For this section, the individual must check the box for the state in which they live. Once the form is complete, the individual must sign and date it.
ASAP Payroll Solutions to Tax Management in Kentucky
If you have employees who live in different states, it can be tedious and time-consuming to manage all of their tax forms and ensure that they are up-to-date at all times. At ASAP Payroll in Indianapolis, we have the payroll tools, software and experience to ensure that all of your employees’ tax documents are filled out correctly and current. We also offer HR services, like employee onboarding, applicant tracking and an employee self-service portal.
To learn more about how we can streamline your payroll and HR services, request a quote today.
